liberalization of india vs china

8/8/2019 Liberalization of India vs China

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It refers to loosening or removal of controls so that economic

development gets encouragement.

It includes abolition of those economic policies, rules,

regulations, administrative controls and procedures which

impede economic development

Economic liberalization is a new economy policy of

promoting market determined economic decisions rather

than bureaucratic arbitrary economic decisions


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INDIA


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y Over the 1980s, government expenditure in India grew at a fasterrate than government revenues.

y The subsidies grew at a faster rate .

y Expenditure on subsidies rose from Rs.19.1 billion in 1980-81 toRs. 107.2 billion in 1990-91.

y Oil-shocks during the last decade.

Reasons for liberalization


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y License raj

y Lack of foreign reserves .

y Gold reserve was empty.

y India was a closed economy before 1991.

y The government was close to default and its foreign exchangereserves had reduced to the point that India could barely financethree weeks worth of imports.

y The Government of India headed by Chandra Shekhar decidedto form several reforms that are collectively termed asliberalisation in the Indian media with Man Mohan Singh whomhe appointed as a special economical advisor.


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Dr. Man Mohan Singh, a professional economist and an economic

administrator, was appointed Finance Minister. Man Mohan Singh isundoubtedly the architect of the most far reaching reforms in India.

Government economists such as Dr. Arvind Virmani took upon themselvesthe task of clarifying the goals, objectives and methods of the reformpackage along with:-

C. Rangarajan,

Montek Singh Ahluwalia,

Shankar Acharya and

Y. Venugopal Reddy.


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The reforms brought changes in three broad areas, collectively known asliberalization, privatization and globalization.

Liberalization did away with regulatory hurdles and minimized licensingrequirements.

Privatization reduced the role of the state and public sector in business.

Globalization made it easier for the MNCs to operate in India.

This policy was later continued by Prime minister P. V. Narasimha Rao,and he was fully supported by his finance minister Manmohan Singhand other officials such as C. Rangarajan, Montek Singh Ahluwalia,Shankar Acharya and Y. Venugopal Reddy.

Effect of reforms


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India is one of the fastest growing economies in the world.

India: Fourth largest economy in terms of Purchasing Power Parity

Tenth most industrialized economy

GDPgrowth rate of 8.1% - Second highest in the world.

In Services sector, India was ranked as the 4th most attractive destination

(up from 14thplace in 2002)

BRIC Study of Goldman Sachs (2003) predicts that:

INDIA WILL EXCEED

Frances GDP in 2020

Germanys in 2025

Japans in 2035

TOBECOMETHE 3RD LARGESTECONOMY INTHEWORLDBY2050


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In order to speed up the process of clearing FDI proposals, the

government also set up Foreign Investment Promotion Board

India also signed the Convention of the MultilateralInvestment Guarantee Agency in order to provide protection toforeign investors

The government also liberalized imports by abolishing theimport approval system. Tariff rates since 1991 have beenappreciably lowered


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CHINA


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y During the 1930s, China developed a modern industrial sector,which stimulated modest but significant economic growth.

Before the collapse of international trade that followed the

onset of the Great Depression

y

The economy was heavily disrupted by the war against Japanand the Chinese Civil War from 1937 to 1949, after which the

victorious Communists installed a planned economy

y The economy largely stagnated and was disrupted by the Great

Leap Forward famine which killed between 30 and 40 million

people


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y Economic reforms began after Deng Xiaoping and hisreformist allies ousted the Gang of Four Maoist faction.

y By the time Deng took power, there was widespreadsupport among the elite for economic reforms. As defacto leader,

y Deng's policies faced opposition from partyconservatives but were extremely successful inincreasing the country's wealth.

PHASE 1 : 1978-1984

PHASE 2 : 1984-1993

PHASE 3 : 1993-2005


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y Deng's first reforms began in agriculture, a sector long

neglected by the Communist Party.

y Decollectivizing agriculture and emphasizing the

Household-responsibility system, which divided theland of the People's communes into private plots

y A dual price system was introduced, in which state-

owned industries were allowed to sell any production

above the plan quota, and commodities were sold at

both plan and market prices


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y Controls on private businesses and governmentintervention continued to decrease, and there wassmall-scale privatization of state enterprises whichhad become unviable

y Reopening of Shanghai StockExchange closed byMao 40 years earlier

y Inflation became problematic in 1985, 1988 and 1992

y

Privatizations began to accelerate after 1992, and theprivate sector surpassed the state sector in share ofGDP for the first time in the mid-1990s


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y In 1997 and 1998, large-scale privatization occurred, in whichall state enterprises, except a few large monopolies, wereliquidated and their assets sold to private investors

y Between 2001 and 2004, the number of state-owned enterprises

decreased by 48 percenty reduced tariffs, trade barriers and regulations, reformed the

banking system, dismantled much of the Mao-era socialwelfare system, forced the PLA to divest itself of military-run

businesses, reduced inflation, and joined the World Trade

Organizationy The domestic private sector first exceeded 50% of GDP in

2005 and has further expanded since


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Source : http://en.wikipedia.org/wiki/File:Prc1952-2005gdp.gif


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y Adoption of egalitarian and populist policies

y Subsidies and control over the health care sector

y Hault to Privatization

y The privileged state sector was the primary recipient ofgovernment investment


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y Chinas trade with the World

y Chinas Top Exports

y Chinas Top Imports

y Chinas Top Trade Partnersy Chinas Top Export Destinations

y Chinas Top Import Suppliers

CHINAS TRADE STATISTICS


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y Not Similar Economies

y Institutional conditions

y The financial sector

y Rates of GDP growth


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INDIA CHINA

GDP

Nominal 2009 $1.367 trillion $4.99 trillion

PPP 2009 $3.862 trillion $9.05 trillion

GDPGrowthRate 8.80% 9.10%

GDPPercapita

Nominal

$ 1124 (142th)

2010

$ 3735

(97th)2009

PPP$ 3176 (127th)

2010$ 6778 (98th)

2009

Source: wikipedia.org/wiki/Economyof_India

wikipedia.org/wiki/Economy_of_the_People's_Republic_of_China


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INDIA CHINA

GDPby Sector Service 57% 42.60%Industry 28% 46.80%

Agriculture 15% 3.30%

Inflation (CPI) 8.62% 3.30%

Population

Below povertyline 37% 2.80%

Labour Force 467 million 813.5 million

Unemployment 9.40% 4.20%

Ease ofDoing

Business InRank 133rd 79th




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INDIA CHINA

Exports $176.5 billion (18th;

2009)

$1.2 trillion (1st; 2009)

Export goods software, petroleum

products, textile

goods, gems and

jewelry, engineering

goods, chemicals,

leather manufactures

electrical and other machinery, including data processing equipment,

apparel, textiles, iron and steel, optical and medical equipment

Main export partners US12.3%, UAE 9.4%

, China9.3% (2008)

US 20.0%,Hong Kong 12.0%, Japan 8.3%, South Korea 4.6%, Germany

4.3% (2009)

Imports $287.5 billion (15th;

2009)

$1.01 trillion (2nd;

2009)

Import goods crude oil, machinery,

gems, fertilizer,

chemicals

electrical and other

machinery, oil and

mineral fuels, optical

and medical equipment,

metal ores, plastics,

organic chemicals

Main importpartners

China11.1%, SaudiArabia 7.5%, US6.6

%,UAE 5.1%, Iran 4

.2%, Singapore4.2%,

Germany 4.2%

(2008)

Japan 12.3%,HongKong 10.1%, South

Korea 9.0%, US

7.7%, Taiwan 6.8%,

Germany 5.6%

(2009)




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The service sector has been growing rapidly overthe last decade and the trend is likely tocontinue. This has become the main contributorto the GDP

India made the transition from an agriculturaleconomy to a service economy in 1979.In 1985,the service sector accounted for 47 per cent of GDP

The share of service sector in the real GDP inIndia has surpassed that of agriculture andindustry at a relatively faster pace as comparedto other industrialized


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y In India, the service sector contributes to more than 54per cent of GDP while its GDP share in China is muchsmaller (below 41 per cent in 2004)

y

China is just showing a gradual growth in the field ofservice sector. India will grow faster than China by2014


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y High savings curtails consumption

y Reliance on investment expansion increased growthvolatility

y Diminishing returnsy misallocation of capital non-performing loans


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y

Lack o investment unds led to neglect o in rastructurey igh production costs stunted manu acturing sector ill

eventually constrain the gro th o high-tech centres IT and IT-

enabled services are skill-intensive, rather than labour-

intensive

y Jobless gro th: rural unemployment and poverty

y Lack o progress in urbanization


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y India seems to have a brighter future prospect compared to China

with a population that is growing younger and will continue to

supply young work force for a long time compared with the aging

y Chinese population, the result of the Chinese government planningstrategies and rapid rise in life expectancy of the Chinese people.

y By 2028 India is expected to be fifth largest consumer economy

due to sustained growth. We can make India the super power

country of the world if we work together by making it a corruption

free country.


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PRESENTED BY:

KRITIKASHARMA (GEN92/55)

ANSHULKAUSHAL(IB/04)

ASHWINI KUMAR(IB/05)DEVKANTRATH (IB/09)

liberalization of india vs china

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